Saving Up is Hard to Do: Handling Higher Income as a Physician

Anyone knows that saving up is extremely important for future spending and retirement, but also can be very hard to do. With an increase in salary, most people including physicians consider ways to spend it right away rather than to save it. There are problems that arise from an increase in income and physicians must consider this far in advance in order to make sound financial plans for the future. Some things to do and remember when handling an increasing income as a physician:
  1. Save Most of Your Raise: Accumulate most of it in a retirement portfolio and remember spending more now will make it painful to cut back later.
  2. Higher Income Means Higher Taxes:  You face higher marginal brackets for both state and federal income taxes resulting in a double or even triple increase from say 15% to 40% just by transitioning from residency to practice.
  3. Less Tax Deductions: It is important to find ways to capture tax deductions and defer taxes, especially with pretax contributions to a retirement plan with guidance from a financial planner.
  4. Financial Planning is Key: Higher income requires higher life and disability insurance. Also, asset protection and estate planning are even more important as a result of becoming greater targets for malpractice lawsuits.
Using these tips and well-though-out financial planning will pay off and allow physicians to prepare for any unexpected financial hurdles down the road. 
Written by Alison Killian

To read more from Alison click here

To read more from Medical Economics click here

Alison Killian is a recent graduate of Grove City College who majored in Business Management and minored in Biology Studies. She is a contributor to Medical Groups and passionate about all facets of healthcare. She plans on continuing work in the healthcare field especially in management. She is very interested in healthcare innovation and finding ways to improve the current system. She hopes to go back to school in a few years to earn a degree in medicine.